TSG GLOBAL EDUCATION WEB, INC.
SHAREHOLDERS AGREEMENT
TABLE OF CONTENTS
1. Representations of the Shareholders . . . . . . . . . . . .1
2. Corporate Governance and Related Matters. . . . . . . . . .2
3. Restriction on Transfer of Shares.. . . . . . . . . . . . .3
4. Right of First Refusal. . . . . . . . . . . . . . . . . . .4
5. Rights of Inclusion (Tag Along).. . . . . . . . . . . . . .6
6. Purchase of Shares upon Death of a Shareholder. . . . . . .7
7. Disposition of Shares Upon Disability of Shareholder/
Employee. . . . . . . . . . . . . . . . . . . . . . . . . .9
8. Right to Purchase - Call Option.. . . . . . . . . . . . . 11
9. Purchase Price. . . . . . . . . . . . . . . . . . . . . . 11
10. Loans.. . . . . . . . . . . . . . . . . . . . . . . . . . 12
11. Insurance.. . . . . . . . . . . . . . . . . . . . . . . . 12
12. Injunctive Relief; Specific Performance.. . . . . . . . . 13
13. Corporate Surplus.. . . . . . . . . . . . . . . . . . . . 13
14. Shareholder Inspection of Corporate Books.. . . . . . . . 13
15. Voting Requirements.. . . . . . . . . . . . . . . . . . . 13
16. Capital Contributions.. . . . . . . . . . . . . . . . . . 15
17. Miscellaneous.. . . . . . . . . . . . . . . . . . . . . . 18
EXHIBIT A Shareholder List. . . . . . . . . . . . . . . . . 21
TSG GLOBAL EDUCATION WEB, INC.
SHAREHOLDERS AGREEMENT
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SHAREHOLDERS' AGREEMENT, effective as of July 7, 1999 (this "Agreement"),
by and among TSG GLOBAL EDUCATION WEB, INC., a Delaware corporation with offices
at X.X. Xxx 000, 000 Xxxxxxxxx Xxxx, Xxxxxxxx, XX 00000, (the "Corporation"),
and each of the persons being herein collectively referred to as the
"Shareholders" and individually as a "Shareholder").
WHEREAS, the Corporation is authorized to issue ten million (10,000,000)
shares of Common Stock, $0.001 par value (the "Common Stock"), five million
(5,000,000) shares of which four million two hundred twenty thousand (4,220,000)
are currently issued and outstanding with seven hundred eighty thousand
(780,000) in reserve and one million (1,000,000) shares of Preferred Stock $1.00
par value ("Preferred Stock") of which two hundred fifty thousand (250,000)
shares are currently issued and outstanding;
WHEREAS, the Shareholders own all of the issued and outstanding shares of
the Common Stock of the Corporation, in the amounts set forth on Exhibit A
annexed hereto; and
WHEREAS, the initial Shareholders shall be NetWolves Corporation
("NetWolves") and Xxxxx X. Xxxxxxxx, Xxxxxx X. Xxxxxxxxxx, Xxxxxx X. Xxxxxxx,
Xxxx X. Xxxxxx and Xxxxxx X. Xxxxxx ("Xxxxxxxx Shareholders").
WHEREAS, the Shareholders and the Corporation desire to regulate the
management of the Corporation, the transfer of the shares of Common Stock and
Preferred Stock now owned or hereafter acquired by the Shareholders (such shares
being hereinafter referred to as the "Shares"), the purchase by the Corporation
and/or the Shareholders of the Shares in certain circumstances and certain other
matters relating to the Corporation, all in accordance with the terms and
subject to the conditions of this Agreement.
NOW THEREFORE, in consideration of the mutual promises and covenants set
forth herein, the parties hereto hereby agree as follows:
1. Representations of the Shareholders.
Each Shareholder represents to and agrees with the other Shareholders and
the Corporation that such Shareholder is the legal holder and beneficial
owner of the Shares currently owned by such Shareholder, that such Shares
and the Shares hereafter acquired by such Shareholder will be owned free
and clear of all liens, claims, charges, options and encumbrances other
than restrictions on transfer under this Agreement, and applicable federal
and state securities laws, and that such Shareholder will have the right to
transfer such Shares upon the terms and subject to the conditions of this
Agreement.
2. Corporate Governance and Related Matters.
Each Shareholder hereby agrees, during the term of this Agreement, to vote
the Shares owned by such Shareholder in the following manner:
a. Upon the execution of this Agreement, each of the Shareholders shall
vote such Shareholder's Shares so as to elect, two (2) persons
designated by Xxxxx X. Xxxxxxxx ("Xxxxxxxx") or in the event of his
death or disability, Xxxxxx X. Xxxxxxxxxx ("Xxxxxxxxxx") and, three
(3) persons designated by NetWolves as directors of the Corporation.
In the event that NetWolves fails to fund an aggregate amount of
$1,750,000 in accordance with the terms of the Agreement, then
Xxxxxxxx shall have the right to designate one (1) additional member
of the Board of Directors. In the event that NetWolves is unable to
provide additional funding beyond one million seven hundred fifty
thousand dollars ($1,750,000.00) to the Corporation, the Board of
Directors will be expanded to seven (7) members to be allocated as
follows: four (4) persons to be designated NetWolves, two (2) persons
to be designated by Xxxxxxxx and one (1) person to be designated by a
new equity investor.
In the event any of the foregoing persons shall be unable or unwilling
to serve as a director of the Corporation, the Shareholders shall vote
all of their Shares so as to elect such replacement or additional
nominees as Xxxxxxxx shall designate or, in the case of a NetWolves
designee, as NetWolves shall designate. If the number of members of
the Board of Directors is increased to more than seven (7) directors,
the Shareholders shall vote all of their Shares so as to allocate the
additional directors between Xxxxxxxx designees and NetWolves
designees.
b. Each Shareholder shall vote such Shareholder's Shares in favor of any
amendment of the Certificate of Incorporation or By-laws of the
Corporation necessary to permit, effect and further carry out the
transactions contemplated hereby.
c. The Shareholders shall vote, and shall cause all persons nominated and
elected by them as directors of the Corporation to appoint the
following persons to the offices set forth opposite their names below:
Xxxxxx X. Xxxxxxxxxx: President and Chief Executive Officer
Xxxxx Xxxxxx: Secretary
Xxxxx X. Xxxxxxxx: Treasurer and Chairman of the Board
d. If any Shareholder shall refuse or is unable to vote its Shares as
provided in this Section 2 at any meeting of the Shareholders of the
Corporation, or shall refuse or is unable to give its consent in lieu
of a meeting, thereupon, without further action by such Shareholder,
the President or Secretary shall be, and each of them hereby is,
irrevocably constituted the attorney-in-fact and proxy of such
Shareholder (i) for the purpose of voting, and shall vote, such Shares
at such meeting as provided in this Section 2; or (ii) for the purpose
of giving such written consent, as the case may be. The Shareholders
acknowledge and agree that such proxy is coupled with an interest and
is irrevocable.
e. In the event that the Corporation consummates an initial public
offering or merges with a publicly held shell, then this Agreement
shall terminate as to the Corporation only. The Agreement will remain
in effect as to the Shareholders.
f. In the event that all or substantially all of the assets or common
stock of NetWolves is sold or NetWolves merges into or is acquired by
a third party (hereinafter the "Sale") then this Agreement shall
terminate as follows:
i. As to NetWolves and its successors or assigns only, provided that
Xxxxxxxxxx and Xxxxxxxx each shall receive gross pre-tax proceeds
of one million one hundred five thousand dollars ($1,105,000.00)
in connection with the Sale of their shares of NetWolves or
otherwise; or
ii. In its entirety, provided that Xxxxxxxx and Xxxxxxxxxx shall each
receive minimum gross pre-tax proceeds of, two million dollars
($2,000,000.00) in connection with the Sale of their shares of
NetWolves or otherwise.
Nothing herein shall prohibit Xxxxxxxx and Xxxxxxxxxx from receiving
additional gross pre-tax proceeds based upon their stock ownership in
NetWolves.
g. Each of the Shareholders shall vote such Shareholder's Shares to
establish a Qualified Incentive Stock Option Plan which has reserved
780,000 shares of Common Stock to be granted in accordance with such
plan.
3. Restriction on Transfer of Shares.
a. The Corporation and the Shareholders wish to avoid the transfer of
Shares to outside third parties who do not have a knowledge of the
Corporation's business and who may disrupt the management of the
Corporation. Each Shareholder hereby agrees that such Shareholder
shall not, as long as this Agreement is in effect, directly or in
directly sell, assign, mortgage, hypothecate, transfer, pledge, lien,
encumber, give or in any way otherwise dispose of (collectively, a
"Transfer") any of the Shares (or any interest therein) except as may
be expressly permitted by this Agreement. The Corporation shall not
transfer on its books any certificates for the Shares nor issue any
certificate in lieu of the Shares unless, in the opinion of counsel to
the Corporation, there has been compliance with all of the material
conditions hereof affecting the Shares. Any purported disposition of
any Shares made other than in full compliance with the terms of this
Agreement shall be null and void and of no force or effect, and shall
not be recognized by the Corporation.
b. Notwithstanding the general prohibition on Transfers contained in
Section 3(a) of this Agreement hereof, the Corporation and the
Shareholders agree that any of the following Transfers shall be
permitted under this Agreement:
i. A Transfer in accordance with Sections 4, 5, 6, 7 or 8 hereof;
ii. A Transfer by NetWolves to any wholly-owned, direct or indirect
subsidiary of NetWolves;
iii. A Transfer or sale by NetWolves of all or substantially all of
the assets or common stock, of NetWolves to a third party, or the
merger into or acquisition of NetWolves by a third party; or
iv. A Transfer to any other party to this Agreement.
c. Upon the execution of this Agreement, each Shareholder shall surrender
to the Corporation his or its stock certificate representing the
Shares, which stock certificate shall be imprinted with the following
legend:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and cannot be
offered or sold except pursuant to an effective registration statement
under such Act or an exemption from registration under such Act which,
in the opinion of counsel for the holder, which counsel and opinion
are reasonably satisfactory to counsel for the corporation, is
available.
The Shares represented hereby are also subject to the terms of a
Shareholders' Agreement, dated as of July 7, 1999, by and among TSG
Global Education Web, Inc., and its Shareholders, a copy of which is
on file at the principal office of the Corporation, and any sale,
pledge, gift, transfer, assignment, encumbrance or other disposition
of the shares represented by this certificate in violation of said
Agreement shall be void and of no effect."
d. As a further condition of any Transfer pursuant to this Agreement,
each transferee shall, prior to such Transfer, agree in writing to be
bound by all of the provisions of this Agreement and no such
transferee shall be permitted to make any Transfer that the original
transferor was not permitted to make.
4. Right of First Refusal.
a. Except as provided in paragraph 3(b) hereof, in the event any
Shareholder shall receive a bona fide written non-collusive offer
or enter into an agreement (the "Offer") for the purchase of his
or its Shares ("Selling Shareholder") from an independent third
party (the "Outside Party"), he, or it or they shall give notice
(the "Option Notice") to the Corporation and the other
Shareholders containing the name and address of the Outside Party
and accompanied by a copy of the Offer. (The Shares subject to
such Offer are referred to herein as the "Offered Shares").
b. Upon the giving by a Selling Shareholder of an Option Notice, the
other Shareholders shall have the right to purchase (the
"Shareholder Right"), at the price, on the terms and subject to
the conditions specified in the Offer, the Offered Shares by
notifying the Selling Shareholder and the Corporation, (the
"Shareholder Notice") within twenty-five (25) days after the date
of the Option Notice whether and to what extent the other
Shareholders intend to exercise the Shareholder Right. If the
other Shareholders fail to exercise the Shareholder Right as to
his or its Proportionate Share (as hereinafter defined) of the
Offered Shares, then the other Shareholders shall have the right
to purchase all or any part of the Offered Shares that any
Shareholders have elected not to purchase by amending his or its
Shareholder Notice within five (5) days after the date that the
Shareholders receive notice that any other Shareholder has so
declined to exercise the Shareholder Right in full or in part.
Failure to deliver the Shareholder Notice within the applicable
periods shall constitute a waiver of such Shareholder's purchase
right as to the Offered Shares.
c. In the event that the Shareholders do not exercise the
Shareholder Right as to all of the Offered Shares, the
Corporation, to the extent permitted by law, shall have the right
(the "Corporation Right") to purchase, at the price, on the terms
and subject to the conditions specified in the Offer, all or part
of the remaining Offered Shares covered by the Option Notice.
Within thirty (30) days after the date of the Option Notice, the
Corporation shall notify the Shareholders (the "Corporation
Notice") whether and to what extent it intends to exercise the
Corporation Right. Failure to deliver the Corporation Notice
within such period shall constitute a waiver of the Corporation
Right.
d. Any Selling Shareholder shall have the obligation to sell to the
other Shareholders and/or the Corporation, as the case may be,
such Offered Shares as are covered by the notices referred to in
Sections 4(b) or 4(c) hereof, and the Selling Shareholder may
sell the balance of the Offered Shares (or all of the Offered
Shares if no such notices have been given) to the Outside Party
on terms not more favorable to such Outside Party than those
contained in the Offer. In the event that such terms are more
favorable or if such sale to the Outside Party is not consummated
within the time period specified in Section 4(e) hereof, the
Offered Shares shall again be subject to the restrictions
contained in this Agreement.
e. The closing for any purchase of Shares ("Closing") by any
Shareholder, and/or the Corporation shall be held at 10:00 a.m.
at the offices of the Corporation on the sixtieth (60th) day
after the date of the Option Notice or at such other time and
place as the parties shall mutually agree. The Closing of a
purchase of Shares by an Outside Party shall occur within sixty
(60) days after the giving of the Option Notice. At the Closing,
the Shareholders, the Corporation or the Outside Party, as the
case may be, shall pay for the Shares in accordance with the
terms of the Offer, the Shareholder shall deliver certificates
representing the Shares free and clear of all liens, charges and
encumbrances (other than those set forth herein or in the Stock
Purchase Agreement) and properly endorsed for transfer and, if
such Shares are being purchased by an Outside Party, such person
shall agree to be bound by the terms of this Agreement in
accordance with Section 3(d) hereof.
f. For purposes of this Agreement, the term "Proportionate Share"
shall mean the percentage of the total number of Shares subject
to the Shareholder Right multiplied by a fraction, the numerator
of which shall be the number of Shares owned by a non-selling
shareholder, as the case may be, divided by all the aggregate
number of Shares owned by the Shareholders.
5. Rights of Inclusion (Tag Along).
a. Except as provided in paragraph 3(b) hereof, no Shareholder, who
owns twenty percent (20%) or more of the issued and outstanding
shares of the Corporation ("20% Shareholder") shall, in any one
transaction or any series of similar transactions, directly or
indirectly sell to any third party or otherwise dispose of more
than fifty percent (50%) of the Shares owned by him or it unless
the terms and conditions of such sale or other disposition to
such third party shall include an offer to the other Shareholders
to include, at the other Shareholders' option, in the sale or
other disposition to the third party, the other Shareholders'
ratable share of the Shares covered by such disposition. If any
20% Shareholder receives a bona fide offer from a third party to
purchase or otherwise acquire more than fifty percent (50%) of
the Shares owned by him or it, the 20% Shareholder shall then
cause the third party's offer to be reduced to writing (which
writing shall include an offer to purchase or otherwise acquire
Shares from the other Shareholders according to the terms and
conditions of Section 5(a)(ii) of this Agreement) and shall send
written notice of the third party's offer (the "Inclusion
Notice") to the other Shareholders. The Inclusion Notice shall be
accompanied by a true and correct copy of the third party's
offer. At any time within thirty (30) days after receipt of the
Inclusion Notice, the other Shareholders may accept the offer
included in the Inclusion Notice for up to his or its
proportionate share by furnishing written notice of such
acceptance to the 20% Shareholder and delivering to the 20%
Shareholder the certificate or certificates representing the
Shares to be sold or otherwise disposed of pursuant to such offer
by the other Shareholders (which certificate or certificates
shall be held in escrow pending the consummation of the sale),
together with a limited power-of-attorney authorizing the 20%
Shareholder to sell or otherwise dispose of such Shares pursuant
to the terms of such third party's offer.
b. The purchase from the other Shareholders pursuant to this Section
5(b) shall be on the same terms and conditions, including the per
Share price (which shall in all events be paid directly to the
other Shareholder by bank cashier's or certified check or by wire
transfer of immediately available funds) and the date of sale or
other disposition, as are received by the 20% Shareholder and
stated in the Inclusion Notice provided to the other Shareholders
by the 20% Shareholder, however, the 20% Shareholder shall be
under no obligation to make any representations or warranties or
agree to any covenants or indemnification provisions in
connection with such sale, except for such representations,
warranties and covenants (and related indemnification) as shall
specifically relate to the 20% Shareholder.
c. Simultaneously with the consummation of the sale or other
disposition of the Shares of the Shareholders to the third party
pursuant to the third party's offer, the 20% Shareholder shall
notify the other Shareholders of the consummation of the sale,
shall cause the purchaser to remit directly to the other
Shareholders the total sales price of the other Shareholders'
Shares sold or otherwise disposed of pursuant thereto and the 20%
Shareholder shall furnish such other evidence of the completion
and time of completion of such sale or other disposition and the
terms thereof as may be reason ably requested by the other
Shareholders.
d. If within thirty (30) days after the receipt of the Inclusion
Notice, the other Shareholders have not accepted the offer
contained in the Inclusion Notice, the other Shareholders, shall
be deemed to have waived any and all rights with respect to the
sale or other disposition of the Shares described in the
Inclusion Notice and the 20% Shareholder shall have sixty (60)
days after receipt of the Inclusion Notice in which to sell or
otherwise dispose of not more than the amount of Shares described
in the Inclusion Notice, on terms not more favorable to the 20%
Shareholder than were set forth in the Inclusion Notice. If the
sale or disposition is not consummated within sixty (60) days,
the 20% Shareholder shall comply with the provisions of this
Section 5 for all proposed future sales or dispositions that are
described in Section 5(a). If, at the end of ninety (90) days
following the receipt of the Inclusion Notice, the 20%
Shareholder has not completed the sale or other disposition of
his Shares and those of the other Shareholders in accordance with
the terms of the third party's offer, the 20% Shareholder shall
return all certificates of the other Shareholders representing
the Shares which the other Shareholders delivered for sale or
other disposition pursuant to this Section 5, and all the
restrictions on sale or other disposition contained in this
Agreement with respect to Shares owned by the 20% Shareholder
shall again be in effect.
6. Purchase of Shares upon Death of a Shareholder.
a. Upon the death of a Shareholder, the Corporation shall purchase
from the deceased Shareholder's estate and the deceased
Shareholder's estate shall sell to the Corporation all of the
deceased Shareholder's Shares, now owned or hereafter acquired,
in accordance with the terms and procedures set forth in Section
9 of this Agreement. For purposes of this Section 6, however: (i)
the date on which the Corporation shall purchase the deceased
Shareholder's Shares shall be the Closing Date which is no later
than sixty (60) days after the later of (A) the qualification of
the deceased Shareholder's legal representative (or, if no legal
representative is appointed or qualifies, within one hundred
eighty (180) days following the death of the deceased
Shareholder), or (B) the collection by the Corporation of the
proceeds of any policy or policies of insurance on the life of
the deceased Shareholder the Corporation may own at the time of
the deceased Shareholder's death, on which Closing Date the down
payment for the deceased Shareholder's Shares shall be paid and
the promissory note shall be delivered to the deceased
Shareholder's estate, and (ii) the amount of the down payment
shall be determined pursuant to subparagraph (b) below. In the
event that the deceased Shareholder's heirs have not caused a
legal representative for the deceased Shareholder's estate to be
appointed and qualified within one hundred twenty (120) days
following the death of the deceased Shareholder, the Corporation
may petition a court of competent jurisdiction to appoint an
appropriate legal representative for the deceased Shareholder's
estate for the purpose of permitting the sale of the deceased
Shareholder's Shares in accordance with the provisions of this
Section 6, it being the express intention of the parties that the
deceased Shareholder's estate shall be obligated to sell the
deceased Shareholder's Shares and that the Corporation be
obligated to purchase the deceased Shareholders Shares as herein
provided.
b. The full amount of the proceeds of any life insurance policies
owned by the Corporation naming the deceased Shareholder as the
insured shall be used as the down payment required to be paid
under the provisions of this Section 6, it being the agreement of
the parties that, in the event the proceeds of any such life
insurance policies owned by the Corporation equal or exceed the
amount of the Purchase Price for the deceased Shareholder's
Shares, the full amount of the Purchase Price shall be paid to
the deceased Shareholder's estate on the Closing Date in a lump
sum from such insurance proceeds. In the event the Corporation
does not own any life insurance policies naming the deceased
Shareholder as the insured, or the proceeds of any such policy or
policies received by the Corporation equal less than fifty
percent (50%) percent of the Purchase Price to be paid by the
Corporation for the deceased Shareholder's Shares, then, in
either such event, the Corporation shall make a cash payment on
the Closing Date to the deceased Shareholder's estate in such an
amount as will result in a total down payment of not less than
twenty-five (25%) percent of the Purchase Price for the deceased
Shareholder's Shares. Any unpaid balance of the Purchase Price
remaining after the proceeds of any life insurance policies
and/or any cash payments made by the Corporation are paid to the
deceased Shareholder's estate shall be paid by the Corporation's
delivery to the deceased Shareholder's estate on the Closing Date
of a promissory note in the form referred to in Section 9(b) of
this Agreement.
c. In the event the Corporation is unable to purchase any or all of
the deceased Shareholder's Shares for the reasons set forth in
Section 13 of the Agreement, the surviving Shareholders shall
purchase from the deceased Shareholder's estate and the deceased
Shareholder's estate shall sell to the surviving Shareholders all
of the deceased Shareholder's Shares which the Corporation was
unable to purchase (the "Remaining Decedent's Shares") on the
same terms and conditions as hereinbefore provided with respect
to the purchase of the deceased Shareholder's Shares by the
Corporation. The obligation of the Corporation with respect to
the Remaining Decedent's Shares shall therefore be deemed to have
been assumed by the surviving Shareholders. In the event the
surviving Shareholders are unable to purchase all of the
remaining Decedents Shares, the Remaining Decedent's Shares which
the surviving Shareholders were unable to purchase (the
"remainder of Decedent's Shares") may be offered for sale to
third parties, provided that any such sale of the Remainder of
Decedent's Shares is made in full compliance with any applicable
federal and/or state laws governing the sale and issuance of
securities.
7. Disposition of Shares Upon Disability of Shareholder/Employee.
a. In the event a Shareholder, who is also an employee of the
Corporation, shall become so mentally or physically disabled that
he shall not be able to actively perform his corporate duties and
responsibilities for a period of three (3) consecutive months or
an aggregate period of six (6) months in any twelve (12) month
period the existence of such a disability to be determined by the
mutual agreement of the parties hereto, or in the event such
agreement cannot be reached, the following procedure:
i. If the Corporation maintains a disability income policy, the
definition set forth in such policy shall control, provided
the issuing insurance company agree to commence disability
payments as a result of such permanent disability.
ii. If the Corporation does not maintain a disability income
policy:
1. Each party shall select an independent physician who
shall examine the subject Shareholder. The mutual
agreement of the two examining physicians shall
control, and their decision shall be binding.
2. If the two physicians cannot agree, they (the
physicians) shall select a third physician to examine
the subject Shareholder. The majority opinion of such
three (3) physicians shall control, and their decision
shall be binding;
(the "Disabled Shareholders") the Corporation shall purchase from
the Disabled Shareholder and the Disabled Shareholder shall sell
to the Corporation all of the Disabled Shareholder's Shares, now
owned or hereafter acquired, in accordance with the terms and
procedures set forth in Section 9 of this Agreement. For purposes
of this Section 7 however: (i) the date on which the Corporation
shall purchase the Disabled Shareholder's Shares shall be a date
(the "Purchase Date") which is no later than nine (9) months
following the onset of the Disabled Shareholder's disability, on
which Purchase Date the down payment for the Disabled
Shareholder's Shares shall be paid and the promissory note shall
be delivered to the Disabled Shareholder (or his legal
representative, as the case may be), and (ii) the amount of the
down payment shall be determined pursuant to subparagraph (b)
below. In the event the Disabled Shareholder is incapable of
managing his affairs and a legal representative for the Disabled
Shareholder has not been appointed and qualified within nine (9)
months following the onset of the Disabled Shareholder's
disability, the Corporation may petition a court of competent
jurisdiction to appoint an appropriate legal representative for
the Disabled Shareholder for the purpose of permitting the sale
of the Disabled Shareholder's Shares in accordance with the
provisions of this Section 7, it being the express intention of
the parties that the Disabled Shareholder shall be obligated to
sell his Shares and the Corporation is obligated to purchase the
Disabled Shareholder's Shares as herein provided.
b. The full amount of the proceeds of any disability insurance
policies owned by the Corporation naming the Disabled Shareholder
as the insured shall be used as the down payment required to be
paid under the provisions of this Section 7, it being the
agreement of the parties hereto that, in the event the proceeds
of any such disability insurance policies owned by the
Corporation equal or exceed the amount of the Purchase Price for
the Disabled Shareholder's Shares, the full amount of the
Purchase Price shall be paid to the Disabled Shareholder (or his
legal representative, as the case may be) on the Purchase Date in
a lump sum from such insurance proceeds. In the event the
Corporation does not own any disability insurance policies naming
the Disabled Shareholder as the insured, or the proceeds of any
such policy or policies received by the Corporation equal less
than fifty percent (50%) percent of the Purchase Price to be paid
by the Corporation for the Disabled Shareholder's Shares, then,
in either such event, the Corporation shall make a cash payment
on the Purchase Date to the Disabled Shareholder (or his legal
representative) in such an amount as will result in a total down
payment of not less than twenty-five (25%) percent of the
Purchase Price for the Disabled Shareholder's Shares. Any unpaid
balance of the Purchase Price remaining after the proceeds of any
disability insurance policies and/or any cash payments made by
the Corporation are paid to the Disabled Shareholder (or his
legal representative) shall be paid by the Corporation's delivery
to the Disabled Shareholder (or his legal representative) on the
Purchase Date of a promissory note in the form referred to in
Section 9(b)of this Agreement.
c. In the event the Corporation is unable to purchase any or all of
the Disabled Shareholder's Shares for the reasons set forth in
Section 13 of this Agreement, the non-disabled Shareholders shall
purchase from the Disabled Shareholder and the Disabled
Shareholder shall sell to the non-disabled Shareholders all of
the Disabled Shareholder's Shares which the Corporation was
unable to purchase (the "Remaining Disabled Shareholder's
Shares") on the same terms and conditions as hereinbefore
provided with respect to the purchase of the Disabled
Shareholder's Shares by the Corporation. The obligation of the
Corporation with respect to the Remaining Disabled Shareholder's
Shares shall therefore be deemed to have been assumed by the
non-disabled Shareholders. In the event the non-disabled
Shareholders are unable to purchase all of the Remaining Disabled
Shareholder's Shares, the Remaining Disabled Shareholder's Shares
which the non-disabled Shareholders were unable to purchase (the
"Remainder of Disabled Shareholder's Shares") may be offered for
sale to third parties, provided that any such sale of the
Remainder of Disabled Shareholder's Shares is made in full
compliance with any applicable federal and/or state laws
governing the sale and issuance of securities.
8. Right to Purchase - Call Option.
a. Upon the occurrence of the following events to any Shareholder,
the Shareholder shall be obliged to offer to sell his or its
Shares to the Corporation at the Purchase Price, as defined in
Section 9 herein:
1. Shareholder files a voluntary petition of bankruptcy;
2. Any Shares of a Shareholder are directed by a court of
competent jurisdiction to be transferred to any person not a
party to this Agreement for any reason including, without
limitation, divorce or satisfaction of a judgment.
9. Purchase Price.
a. The purchase price for the Shares ("Purchase Price") purchased
pursuant to this Section 9 shall be the fair market value of the
Common Stock (as determined by the Corporation's independent
certified public accountants in accordance with generally
accepted accounting principles and valued on the date of the
events enumerated in Sections 4, 5, 6, 7 or 8 of this Agreement).
b. The Closing for any purchase of Shares pursuant to this Section 9
shall be held at 10:00 a.m. at the offices of the Corporation on
the sixtieth (60th) day after the date that the Shareholders or
the Corporation provide notice that he or it is exercising his or
its right to purchase the Shares pursuant to Sections 4, 5, 6, 7
or 8 herein, or at such other time and place as the parties shall
agree. At the Closing, the Shareholders or the Corporation shall
pay for the Shares and the selling Shareholders shall deliver
certificates representing the Shares free and clear of all liens,
charges and encumbrances and properly endorsed for transfer. At
the option of the purchasing Shareholders or the Corporation,
payment of the Purchase Price for the Shares may be made in up to
thirty-six (36) equal monthly installments as determined by the
purchasing Shareholders or the Corporation in his or its sole
discretion, with the first such installment to be paid at the
closing of the purchase of such Shares and the remaining
installments to be paid on the first day of each month
thereafter. The obligation to make the installment payments shall
be evidenced by a promissory note bearing interest at a rate
equal to the prime rate of interest set forth in The Wall Street
Journal at the time of issuance and delivery of such promissory
note.
10. Loans.
a. If there shall be a loan due from the Corporation to a
Shareholder whose Shares are being sold pursuant to this
Agreement, unless there is a preexisting agreement in place, such
loan shall be repaid by the Corporation in equal monthly
installments over a thirty-six (36) month period. The obligation
of the Corporation to repay any such loan, if not already
evidenced by a promissory note, shall be evidenced by a
promissory note of the Corporation in the principal amount of
such loan, which promissory note shall bear interest at the rate
such loan was earning at the time of the purchase of such
Shareholders Shares. Said promissory note shall be delivered by
the Corporation to the Shareholder whose Shares are being sold
pursuant to this Agreement (or his estate or legal
representative, as the case may be) at the time such
Shareholder's Shares are delivered to the Corporation (or, if
such Shareholder's Shares are being sold to another Shareholder,
at the time such Shareholder's Shares are delivered to the other
Shareholder).
x. Xxxxxxxxxx shall have the option to borrow up to fifty thousand
dollars ($50,000.00) from the Corporation at an interest rate of
six percent (6%) per annum or the applicable federal rate,
whichever is greater. Interest only shall be payable quarterly;
however, on the third anniversary of the date of the issuance of
the promissory note the balance of the principal shall become due
and payable to the Corporation.
11. Insurance.
a. The Corporation, at its option, may purchase and cause to be
maintained life insurance policies in amounts determined by the
Corporation on the Shareholder's life with the Corporation as
owner and beneficiary thereof for the purpose of meeting its
obligations under Sections 6 and 7 hereof. The Corporation may,
from time to time, purchase such additional amounts of insurance
as it deems appropriate in light of increases in the fair market
value of the Common Stock of the Corporation. The Shareholder
employees of the Corporation shall cooperate in connection with
the purchase and maintenance of any such insurance policy,
including without limitation, the submission to any medical
examinations reasonably required to obtain and main tain any such
policy.
x. Xxxxxxxx and Xxxxxxxxxx shall have the right to purchase keyman
insurance on the lives of Xxxxxx X. Xxxxxxx, Xxxxxx Xxxxxxxx and
Xxxxx X. Xxxxxxxx in an amount up to two million dollars
($2,000,000.00) each, the premium for which will be paid for by
Xxxxxxxx and Xxxxxxxxxx, personally.
12. Injunctive Relief; Specific Performance.
Each of the Shareholders acknowledges that his or its interest in the
Agreement is unique to him or it, that his or its Shares cannot be
readily purchased or sold in the open market and that the other
Shareholders and the Corporation will be irreparably damaged in the
event of a breach or threatened breach of the terms, covenants and/or
conditions of this Agreement by any Shareholder which damages will not
be measurable or compensable in money damages unless this Agreement
shall be specifically enforced. In addition, to any other remedy to
which the other Shareholders or the Corporation may be entitled, the
other Shareholders or the Corporation shall be entitled to a
preliminary and permanent injunction, without showing any actual
damage or threat of irreparable injury, and/or a decree for specific
performance, without any bond or other security being required in
connection therewith, in accordance with the provisions hereof.
13. Corporate Surplus.
If the Corporation shall not have sufficient surplus to permit it to
lawfully make payment of the Purchase Price for the Shares purchased
by it under this Agreement, the entire available surplus shall be paid
on account, and each Shareholder or the legal representative of any
Shareholder's estate shall promptly take such measures to vote the
respective holdings of Shares owned by the Shareholder to reduce the
capital of the Corporation or to take such other steps as may be
appropriate or necessary in order to enable the Corporation to
lawfully make payment of the purchase price for Shares purchased by
it.
14. Shareholder Inspection of Corporate Books.
The Corporation shall keep complete and correct books and records of:
Shareholder proceedings, board and committee meetings; and the names
and addresses of all Shareholders, including the number and class of
Shares held by each Shareholder and the dates when they became owners
thereof (collectively called the "books and records").
All Shareholders shall have the right to inspect the books and records
of the Corporation upon providing the Corporation or its designated
agent with ten (10) days written notice.
15. Voting Requirements.
Except as herewith permitted in this Agreement unless a greater
percentage vote is required by law, the written consent or the
affirmative vote of at least 80% of the entire board of directors (the
"Required Super-Majority") shall be required to authorize any of the
following:
a. Any merger or consolidation of the Corporation with or into any
other corporation (provided, that in any merger or consolidation,
all of the provisions of the Agreement shall be binding on the
survivor corporation or consolidated corporation, to the same
extent and with the same effect as in respect of the
Corporation);
b. Modification of the Corporation from a "C" corporation to a
limited liability Company or similar "pass through entity".
c. The sale, lease or exchange of all or substantially all of the
assets of the Corporation;
d. The issuance of any Shares other than those set forth on Exhibit
A attached hereto or the agreed ISO Shares; provided, however,
that no Shares other than those set forth on Exhibit A attached
hereto may be issued unless, at the time of such issuance, the
proposed shareholder is or becomes a party to this Agreement by
signing a counterpart hereof or a consent to be bound hereby;
e. The dissolution of the Corporation;
f. The adoption of a plan of liquidation of the Corporation;
g. Any action by the Corporation to commence any case, proceeding or
other action (i) under any existing or future law of any
jurisdiction relating to bankruptcy, insolvency, reorganization
or relief of debtors, seeking to have any order for relief
entered with respect to it, or seeking to adjudicate it a
bankrupt or insolvent, or seeking reorganization, arrangement,
adjustment, winding-up, liquidation, dissolution, composition or
other relief with respect to it or its debts, or (ii) seeking
appointment of a receiver, trustee, custodian or other similar
official for it, or for all or any substantial part of its
assets, or making a general assignment for the benefit or its
creditors;
h. Any amendment of the certificate of incorporation or by-laws of
the Corporation;
i. Any amendment of this Agreement;
j. Any investment or expenditure by the Corporation directly or
indirectly, through a subsidiary or otherwise, which exceeds
$250,000 whether such investment or expenditure is made in a lump
sum or in a series of related payments unless in the Business
Plan, attached as Exhibit B ; or
k. Approval of any agreements, documents or other arrangements
between or involving the Corporation and any shareholder or
affiliate thereof, as well as, any amendment, consent or waiver
with respect to such arrangements;
l. Removal of directors other than by the party which designated the
director;
m. Approval of the appointment of the members of any committee
established by the board of directors;
n. Declaration of dividends;
o. A material change in the business of the Corporation;
p. Issuance, purchase or redemption of the Corporation of any
securities of the Corporation and any change, increase or
reduction in the capitalization of the Corporation;
q. Appointment or removal of any officer of the Corporation except
as provided in the employment agreement to which the Corporation
is a party;
r. Any reduction of the funding requirements of the Business Plan;
and
s. To obligate the Corporation to repay all or any portion of the
open advance made by NetWolves as referenced in Section 16
herein.
A majority vote of the board of directors, to the extend board of
directors approval is required, shall prevail with regard to all other
corporate action, including, without limitation, matters affecting
products, pricing, sales, inventory and operations.
16. Capital Contributions.
The parties recognize that there are certain funding requirements for
the proposed business of the Corporation. NetWolves agrees to make the
following payments to the Corporation for this purpose:
Date of Payment Amount
--------------- ------
April 19, 1999 $50,000.00
May 5, 1999 $117,000.00
May 14, 1999 $100,000.00
May 24, 1999 $100,000.00
May 28, 1999 $332,000.00
June 11, 1999 $150,000.00
June 29, 1999 $100,000.00
July 7, 1999 $426,000.00
August 1, 1999 $375,000.00
September 15, 1999 $850,000.00 - $1,000,000.00
October 15, 1999 $850,000.00 - $1,000,000.00
November 15, 1999 $850,000.00 - $1,000,000.00
The parties agree that NetWolves shall have the option to secure all or
any part of the above proceeds through the sale of part of its shares in the
Corporation or through the merger of the Corporation into a publicly traded
corporation, provided that the aggregate equity interest of the Xxxxxxxx
Shareholders shall not be diluted as a result of such transactions. The parties
further agree that the funds contributed by NetWolves shall be structured as a
non-interest bearing open advance to the Corporation which shall have no
maturity date and shall be subordinate to all other debt and obligations of the
Corporation.
In the event NetWolves fails to make the payments set forth in this
Section, and such failure continues for twenty (20) days after written notice
thereof, the number of Shares owned by NetWolves in the Corporation shall be
reduced as follows:
-------------------------------------------------------------------------------------------------------------------------
Xxxxxxxx Shareholders Number of Shares Percentage of
NetWolves Percentage Xxxxxxxx Percentage of TSG Available to Sell to TSG Shares
NetWolves NetWolves of TSG Assuming Shareholders Shares Assuming Outside Investors Available for
Investment Number of TSG 5,000,000 Shares Number of TSG 5,000,000 Shares Assuming 5,000,000 Outside
Amount Shares Outstanding Shares Outstanding Shares Outstanding Investors
-------------------------------------------------------------------------------------------------------------------------
$4,750,000.00 4,150,000 83.0% 850,000 17% 0 0.0%
-------------------------------------------------------------------------------------------------------------------------
4,050,000.00 4,050,000 81.0% 850,000 17% 100,000 2.0%
-------------------------------------------------------------------------------------------------------------------------
3,250,000.00 3,825,000 73.0% 850,000 17% 325,000 10.0%
-------------------------------------------------------------------------------------------------------------------------
2,250,000.00 3,075,000 58.0% 850,000 17% 1,075,000 25.0%
-------------------------------------------------------------------------------------------------------------------------
1,750,000.00 2,700,000 50.5% 850,000 17% 1,450,000 32.5%
-------------------------------------------------------------------------------------------------------------------------
1,000,000.00 1,950,000 35.5% 850,000 17% 2,200,000 47.5%
-------------------------------------------------------------------------------------------------------------------------
---------
1. The 850,000 includes 70,000 shares purchased by the Xxxxxxxx Shareholders, ISO shares of 605,000 and 175,000 reserved for ISO
shares tied to the achievement of goals in the Business Plan.
2. The equity received for the amounts paid shall be computed on a pro rata basis.
3. NetWolves has a twenty (20) day grace period after the due date of any payment to make the required payment.
4. Formula:
-------
2.0% For First $700,000
8.0% For Next $800,000 (1 Point Per $100,000)
15.0% For Next $1,000,000 (1.5 Point Per $100,000)
7.5% For Next $500,000 (1.5 Point Per $100,000)
15.0% For Next $750,000 (2 Point Per $100,000)
If 5,000,000 shares of TSG stock have been issued and if NetWolves does
not make any further funding payments of the amounts indicated above, TSG will
have the right to obtain equity from NetWolves in order to raise the funds
required for the Business Plan from entities other than NetWolves or its
affiliates provided only that NetWolves has the right of first refusal to match
the amount and the terms of any such funding payments. This raise is not to be
considered a Second Capital Raise. However, NetWolves will have the opportunity
to fund the Corporation for the full amount indicated above until twenty (20)
days after November 15, 1999, in the event no third parties have provided the
necessary funds in the interim period.
17. Miscellaneous.
a. Each party hereto acknowledges that it or he has read this Agreement,
understands it, and agrees to be bound by its terms, and further
acknowledges and agrees that it is the complete and exclusive
statement of the agreement and understanding of the parties regarding
the subject matter hereof, which supersedes and merges all prior
proposals, agreements and understandings, oral and written, relating
to the subject matter hereof. This Agreement may not be changed
orally, but only by an agreement in writing.
b. No waiver of any breach or default hereunder shall be considered valid
unless in writing, and no such waiver shall be deemed a waiver of any
subsequent breach or default of the same or similar nature.
c. If any provision of this Agreement shall be held invalid or
unenforceable, such invalidity or unenforceability shall attach only
to such provision and shall not in any manner affect or render invalid
or unenforceable any other severable provision of this Agreement, and
this Agreement shall be carried out as if any such invalid or
unenforceable provision were not contained herein. In the event that
any provision is declared invalid or unenforceable, the Shareholders
and the Corporation agree to substitute for such invalid or
unenforceable provision a new provision which reflects, to the closest
extent possible, the intent of the parties.
d. Except as otherwise expressly provided herein, this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors, estates, heirs, legal representatives and
permitted assigns and transferees.
e. The section headings contained herein are for the purposes of
convenience only and are not intended to define or limit the contents
of said actions.
f. This Agreement shall be governed by the laws of the State of New York
(without giving effect to principles of conflicts of law). The
Shareholders and the Corporation consent and agree that jurisdiction
and venue for all legal proceedings relating to the subject matter of
this Agreement shall lie exclusively with the appropriate federal or
state court sitting within the State of New York, County of New York.
g. A copy of this Agreement shall be filed with the Secretary of the
Corporation and kept with the records of the Corporation.
h. Any notice or other communication to be given hereunder shall be in
writing and delivered personally or sent by certified or registered
mail, postage prepaid, if to the Corporation, addressed to the
Corporation at its then-principal business address, and if to any
Shareholder, addressed to him or it at his or its address as it
appears in the stock records of the Corporation, or to such other
address as any party may have furnished to the others in writing.
Unless otherwise provided in this Agreement, notice given pursuant to
this section shall be deemed given as of the date of its receipt.
i. This Agreement may be executed in two (2) or more counterparts, each
of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
j. All representations, warranties and agreements contained herein shall
survive the execution and delivery of this Agreement.
k. This Agreement and the restrictions on transfer set forth herein shall
terminate upon the occurrence of any of the following events: (i)
cessation of the Corporation's business, (ii) bankruptcy, receivership
or dissolution of the Corporation, (iii) the voluntary agreement of
all parties who are bound by the terms hereof. Upon termination of
this Agreement, each Shareholder shall surrender to the Corporation
the certificates for his or its Shares and the Corporation shall issue
to him, her or it, in lieu thereof, new certificates for an equal
number of Shares without the second of the two legends set forth in
Section 3(c) hereof.
[SIGNATURES APPEAR ON NEXT PAGE]
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
TSG Global Education Web, Inc. NetWolves Corporation
By: /s/ Xxxxxx X. Xxxxxxxxxx By: /s/ Xxxxxx X. Xxxxxxx
------------------------------------ ----------------------------
President & Chief Executive Officer Xxxxxx X. Xxxxxxx
Chief Executive Officer
/s/ Xxxxxx X. Xxxxxxxxxx
------------------------------------
Xxxxxx X. Xxxxxxxxxx
in his individual capacity
/s/ Xxxxx X. Xxxxxxxx
------------------------------------
Xxxxx X. Xxxxxxxx
in his individual capacity
/s/ Xxxxxx X. Xxxxxxx
------------------------------------
Xxxxxx X. Xxxxxxx
in his individual capacity
/s/ Xxxx X. Xxxxxx
------------------------------------
Xxxx X. Xxxxxx
in his individual capacity
/s/ Xxxxxx X. Xxxxxx
------------------------------------
Xxxxxx X. Xxxxxx
in his individual capacity
EXHIBIT A Shareholder List
Name of Shareholder Class of Stock Number of Shares Owned
------------------- -------------- ----------------------
NetWolves Corporation Common Stock 4,150,000
000 Xxxxxxxxxxx Xxxx
Xxxxx 000
Xxxxxxxx, XX 00000
Xxxxx X. Xxxxxxxx Common Stock 25,250
00 Xxxxxxxxxx Xxxx Xxxx
Xxxxxxx, XX 00000
Xxxxxx X. Xxxxxxxxxx Common Stock 25,250
00 Xxxx Xxxx Xxxx
Xxxxxxx, XX 00000
Common Stock
Xxxxxx X. Xxxxxxx Common Stock 6,500
0 Xxxxxx Xxxx
Xxxxxxxx, XX 00000
Xxxx X. Xxxxxx Common Stock 6,500
00 Xxxx Xxxxxx Xxxx
Xxxx Xxxxxxxx, XX 00000
Xxxxxx X. Xxxxxx Common Stock 6,500
000 00xx Xxxxxx
Xxxxx Xxxx, XX 00000
Xxxxx X. Xxxxxxxx Preferred Stock 250,000
00 Xxxxxxxxxx Xxxx Xxxx
Xxxxxxx, XX 00000
